News Corp. Chmn. Rupert Murdoch in a conference call with analysts Tues. revealed some of his specific plans for DirecTV, pending approval of his company’s acquisition of parent Hughes Electronics: “With the addition of DirecTV, we will have built the world’s first truly global television platform, a platform that will immediately serve more than 25 million subscribers across the globe.” Murdoch said that he welcomed “stiff competition… from the larger and dominant cable companies” in the U.S. and that the transaction would “energize” the multichannel market.
SBC’s persistent difficulties in meeting wholesale service performance standards prompted Ill. and Mich. regulators to review the carrier’s performance plans. SBC was assessed $3.8 million in penalties by the former Ameritech states for wholesale service performance shortfalls in January, up 62.7% from the $2.34 million paid for Dec. The Mich. PSC adopted a staff recommendation to modify SBC’s performance plan to “increase the incentives” for compliance. Mich. assessed SBC $702,003 for Jan. performance shortfalls, up from $420,972 in Dec., for a total of $8.6 million. Mich. CLECs had complained of inaccurate data in SBC’s compliance reports and urged the PSC to verify the accuracy of the data and to modify the performance plan. The PSC changed the plan to eliminate certain “K-table” factors that amounted to an SBC nonperformance allowance. Those same factors already have been eliminated in Ill., Ind. and Wis. The PSC said the net effect would be to increase the penalties for noncompliance. The agency also ordered SBC to publicize the fines it paid to the state and the credits it gave to CLECs. In Ill., the Commerce Commission staff said it would be reviewing the latest SBC wholesale penalty payments to determine whether the current penalties were providing an adequate incentive for compliance. In Ill., SBC for Jan. must issue $1.9 million in CLEC credits and pay a $743,200 fine to the state. That $2.7 million total is well above the Dec. penalty of $1.6 million, for a total of $46.54 million since July 2000 when the performance enforcement program was implemented in the former Ameritech region. In the other Great Lakes states, Ohio fined SBC $233,245, up from $201,412 in Dec., for a total of $13.8 million. In Ind., SBC was penalized $84,820, up from the Dec. figure of $61,645, for a total of $471,213. SBC also was assessed $92,485 in Wis., up from $23,688 in Dec., for a total of $4.2 million. The Wis. penalties have been stayed pending the final outcome of SBC litigation over the performance plan.
Legislation introduced Thurs. in the Senate would prevent the FCC from holding auctions for Multichannel Video Distribution & Data Service (MVDDS). The proposed Emergency Communications & Competition Act (ECCA) (S-564), introduced by Sen. Landrieu (D-La.), is designed to speed deployment of MVDDS, which she said would reduce cable rates and create more broadband access. Northpoint probably would be the biggest benefactor of such legislation, sources said.
AT&T said it had repurchased $3.8 billion of debt for cash, reducing its $22.6 billion debt 1/6. It said it bought back $1.16 billion of 6.4% notes due March 2004 and $2.59 billion of its 6.5% notes due March 2013. Fitch Ratings said Fri. it cut AT&T’s rating outlook to negative from stable, following similar action by Standard & Poor’s earlier in week (CD Jan 28 p7). Fitch affirmed AT&T’s senior unsecured debt rating at BBB+ and its F2 short-term rating. It said AT&T Business Service revenue was affected by pricing pressures in its long distance voice segment and slowing growth in enterprise data businesses. Fitch said decreased IT spending and increased competition would “impact AT&T Business Service’s ability to return to a revenue growth environment in the near term.” However, it said its rating reflected company’s strong capital structure, strong liquidity position, free cash flow generation capabilities, expectation of further debt reduction. Fitch said AT&T’s liquidity position was supported by $8 billion cash at end of 2002 and $5 billion of available bank and accounts receivable securitization facilities. It said scheduled maturities consisted of $2.4 billion in 2003, including $1 billion short-term debt, and $2.4 billion in 2004. However, it said, after considering completion of AT&T’s debt repurchase offer, 2004 maturities would stand at $1.2 billion.
Overall ad spending rose 3.8% in 3rd quarter, including gains in most types of media, Nielsen Media Research reported. Network TV was up 8% in quarter, trailing only local newspapers (9.5%), and network radio ad revenue increased 7%, Nielsen said.
News Corp. said first-quarter profit increased to $162 million from $73 million last year, with revenue increasing 12% to $3.8 billion and operating income 51% to $548 million. Growth was driven primarily by substantial increases in TV and cable network programming segments, it said. TV segment had operating income of $188 million, up $136 million from year ago. Fox TV stations’ operating income grew $93 million, benefiting from stronger ad market, it said. Cable unit, including Fox News Channel and Fox News Network, reported operating income of $118 million, up $86 million, reflecting strong growth across all of company’s cable TV channels, it said. Fox News operating income rose $29 million on increases both in affiliate and ad revenue, company said, with affiliate revenue being driven by 10% increase in subscribers. Fox Sports operating profit improved 87% primarily due to strong results at Regional Sports Networks and FX channel, it said.
Ill. CLEC group said statement by Qwest CEO Richard Notebaert that he considered it “fundamentally wrong” for Qwest to compete in local markets of Ameritech, which he headed until Ameritech merged with SBC in 1999, indicated there might be collusion between Bell companies to thwart competition. Notebaert said competing for Ameritech’s residential customers “might be a good way to turn a quick dollar but that doesn’t make it right.” His statement, quoted in Ill. news media, came as Qwest announced 3rd- quarter loss of $214 million and 13% fall in revenue, to $3.8 billion from $4.37 billion year earlier. Notebaert said expanding into new local service markets in other regions wasn’t good strategy. He also sided with SBC in opposition to unbundled network element platforms (UNE-Ps) because of pricing he called “nuts.” Notebaert said Qwest provided competitive data and long distance service to large businesses in Chicago area but had no plans to offer local service to small businesses or residential customers. In response, Ill. Coalition for Competitive Telecom called Notebaert’s comments “evidence of potential collusion among regional Bell phone monopolies to not compete against one another and kill off potential competitors in local phone service.” CLEC group said remarks indicated Bells’ strategy was to divide country into local phone “fiefdoms,” not compete against each other, and devote their collective efforts to “eliminating would-be competitors in local service.”
Qwest net 3rd-quarter loss widened to $214 million from $142 million loss year earlier as revenue fell 13.2% to $3.8 billion. Company attributed drop to competitive pressures in local and long distance services, continued economic factors and reductions in data and IP services due to its efforts to eliminate what it said were less-profitable businesses. Losses appeared to cross all of Qwest’s segments, with business services revenue down 5.8%, consumer services 9.2%, wholesale services 20% excluding $133 million in optical capacity asset revenue that was subject to restatement. On brighter side, Qwest CEO Richard Notebaert said company “took significant steps to strengthen the company’s balance sheet and address liquidity concerns” in 3rd quarter. Qwest CFO Oren Shaffer said senior management was “creating an efficient and disciplined company” while “we continue to de- emphasize low-margin businesses and drive costs out of our core operations.”
CLEC industry has stabilized and “is about to turn the corner,” ALTS Pres. John Windhausen said at news briefing on progress report his group released Thurs. Report said: “Industry experts are lagging behind the real developments in the marketplace. Indeed, several signs point to the likelihood of a CLEC revival in 2003.” However, BellSouth spokesman said news that reasonable number of CLECs were reaching state of financial equilibrium served “to restate what all 9 regulatory agencies in BellSouth’s region have confirmed -- BellSouth’s network is open to competition.”
Saying it lacked oversight, General Accounting Office (GAO) dismissed protests filed by Sprint and Global Crossing over hotly disputed, $450 million defense network contract awarded to WorldCom. Defense Information Systems Agency (DISA) awarded IP network contract to WorldCom before carrier filed for bankruptcy. Sprint and Global Crossing protested after WorldCom disclosed in June it had overstated earnings by $3.8 billion in 2001 and 2002. Carriers argued that DISA’s contract decision was based on faulty financial information from WorldCom, which meant Defense Research & Engineering Network (DREN) contract award should be void.